Policyholder Services



Leasing Equipment, Space or Employees

By Kimberly Wittchow, JD, OMIC Staff Attorney, and Betsy Kelley, OMIC VP of Product Management

Digest, Winter 2007

It is important to understand how your policy responds when you lease your office equipment, space, or employees to others.

Leased Equipment or Space

If an OMIC insured enters into a lease agreement with another physician or group, allowing the other use of its equipment or space, the arrangement may be treated either like a landlord-tenant relationship or an outpatient surgical facility, depending on the facts of the particular situation.

In general, when an OMIC insured (the lessor) enters into a formal lease agreement to provide space or equipment to other ophthalmologists (the lessee) and the lessor is not providing other health care-related services under the agreement, its liability should, at least theoretically, be limited to that of a landlord or lessor, even though its members are health care providers. This is most clear when leased equipment is used at the lessee’s site or when the lessor leases its office space and equipment for use when the lessor’s physicians are not themselves occupying the space or using the equipment. The lessor’s OMIC policy would not cover any liability arising out of the lessee’s use of the equipment or space as this is a general liability exposure.

However, the lessor may be exposed to additional liability risks if the lessee’s physicians use the space and/or equipment concurrently with the lessor’s physicians or if the lease agreement provides for the lessor to extend services beyond that of a typical landlord/lessor. For instance, the lessor may credential utilizers or operate the equipment on behalf of the lessee. The lessor’s liability exposure will depend upon the services the lessor provides and how the situation is perceived by patients.

If there is no formal lease agreement and the outside utilizers are given open access to the owner’s space and equipment, the situation is more clearcut. OMIC would treat the arrangement as an “outpatient surgical facility” (OSF). Subject to underwriting review, compliance with OMIC’s OSF requirements, and payment of any applicable premium, coverage may be extended to the OSF for its vicarious liability arising from the professional services rendered at the facility.

An OSF is defined as an ambulatory surgery center, laser refractive center, or surgical facility (including an in-office surgical suite or in-office laser equipment) utilized by physicians other than the owners and their employees. OSFs encounter the same type of increased liability that hospitals do for credentialing the physicians who use the OSF and for conducting peer review. In laser centers in particular, the OSF must properly maintain and calibrate equipment and train users in the operation of the equipment. In addition, employees of the OSF may provide professional support and assistance to the outside utilizers. For these reasons, when a leasing agreement does not exist, or when the agreement calls for the lessor to perform tasks outside of the landlord/lessor realm, liability is increased and the arrangement must be treated like an OSF in order for the group to be properly underwritten and protected.

Leased Employees

Ideally, when lessees use equipment leased from an OMIC-insured group, they should provide their own qualified staff to assist them. However, if the lessees do not have anyone qualified to assist and they need the lessor to provide staff trained and skilled in performing procedures on the equipment, then the lessor should formally lease the employee as well as the equipment to the lessee in order for the lessee’s policy to respond (assuming the lessee is OMIC insured or has similar policy coverage). In this case, the lessee’s policy would extend coverage to the leased employee while that person was rendering services on behalf of the lessee. The lessor’s policy would not cover the leased employee for the work he or she did for the outside utilizer. The policy covers non-physician employees only while they are acting within the scope of their employment by and for the direct benefit of the insured.

Similarly, if an OMIC insured leases his or her employees to work in another ophthalmologist’s office, the employee is not covered under the OMIC insured lessor’s policy for such activities. Although it might be part of the employee’s job description, he or she will not be working for the direct benefit of the employer. Instead, the employee will be working for the direct benefit of the lessee and may be covered under the lessee’s policy as a leased employee. If the employee is not formally leased to the other ophthalmologist, but instead is simply “loaned,” the work by the employee again is not for the direct benefit of the employer and therefore is not covered under the employer’s policy. And, under OMIC’s policy, since the borrower has not formally leased the employee, the employee might not have coverage under the borrower’s policy. Employees, therefore, should ensure that they are covered under a lessee’s or borrowing ophthalmologist’s policy before agreeing to work for them. If not, the employee should obtain his or her own policy with an appropriate carrier.

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